SEUS: What Went Wrong?

John Sepulvado and Emily Green

Southeastern U.S. Insurance, or SEUS, once boasted it was the third largest workers compensation insurer in Georgia. But last year, state regulators noticed some accounting discrepancies, and soon after, a Fulton county judge shut the company down. Now, state officials are conducting a criminal investigation into SEUS. GPB examined the red flags regulators should have noticed but didn't and the role prominent Georgians played in the company. We also look at the struggle of a family once dependent on workers comp benefits from SEUS.

SEUS began as a captive insurance company, and it began selling policies to a very niche market---PEO's. Those are leased labor companies---essentially temp services. To cover the liabilities, SEUS purchased reinsurance from a now failed Bermuda based company. Then, in 2006, SEUS became a larger stock company--and started selling insurance to any company or municipality that wanted to buy it. Former Georgia Insurance Commissioner Tim Ryles says the expansion of the company, along with the low rates, should have raised red flags for regulators. Ryles says another red flag is that SEUS started doing business in Bermuda.

“Offshore companies are notorious for this kind of stuff. A regulator ought to step in right away and take some action to make sure that Bermuda company is solvent , that it is regulated by at least some entity, domestic or foreign,” says Ryles.

Yet another red flag for Ryles is that SEUS CEO Clark Fain was involved with First Oglethorpe, another workers comp company at the center of controversy in the 1990s. Fain handled marketing, according to newspaper reports. When Ryles was Insurance Commissioner, he investigated First Oglethorpe for a questionable loan deal. Ultimately, the company was cleared. Current Insurance Commissioner John Oxendine says his office monitored SEUS properly, and only noticed irregularities at SEUS after learning of a land and loan deal between SEUS and CEO Clark Fain, totaling more than $10 million dollars.

“Whenever you have a transaction at such a large portion of the assets that’s going to raise a big question. We then found out that this land deal was actually perfected without our consent. It was required to be approved by the department, they went ahead and did it without our approval. We instantly raised our concerns. We later forced the company to reverse the land deal. That started bringing up questions about the appropriateness of some of their other business transactions,” says Oxendine.

Meanwhile, SEUS had assembled an advisory board stacked with powerful and politically well connected Georgians to offer insight to the company. Former State House Majority leader Larry Walker, Former Democratic Speaker Terry Coleman, and Former University of Georgia Head Coach Ray Goff served on the board, as well as Congressman Lynn Westmoreland. Like every other advisory board member contacted by GPB, he says he can’t recall much of what was discussed at those meetings. Furthermore, Westmoreland says he never advised the company.

“No, I didn’t give any recommendations. No. You know, you’re basically, you’re there, people run their business model by you…I mean you’re a business person. You’ve been in business. It’s just exactly that. They call it an advisory board, but I’ve never advised anybody,” says Westmoreland.

Westmoreland says he was paid $1,500 dollars per meeting. Other advisory board members took trips to Europe, and went on hunting retreats, all paid for by SEUS. Commissioner Oxendine, meanwhile, received $2,500 dollars in campaign contributions from Clark Fain. Oxendine says Fain’s political influence did not influence regulation, and notes his office opened up a criminal investigation. Fain, in statements, says he has not committed fraud and has done nothing wrong. When finished, the criminal investigation may be able to explain how a small but powerful insurance company that insured government workers went from jetting politicians around the globe to liquidation, unable to pay for its claims.

SEUS’ liquidation has also meant incredible hardships for families who were dependent on workers comp. benefits from SEUS. Kenny Whitey is one such person.

Kenny used to work as a truck driver. He got hurt on the job, falling off a tractor trailer, and as a result, he has a traumatic brain injury and is paralyzed. He can only move his thumb. SUES told Kenny's lawyer his medical care cost about $45,000 dollars a month. And at first SEUS paid for it all. But then the company was liquidated, the payments stopped, and now Shirley and her husband Herbert, Kenny’s dad, are providing 24 hour care during their retirement.

“It's just... this is rough. It would be on anybody I guess. As much help as we always had, and then coming down to not having anything. But what little we get now help, but not like it used to be," says Herbert Whitey, Kenny’ dad.

Kenny is now on Medicaid, which covers eight hours of nursing care. At night, Kenny’s mom, Shirley sleeps with a baby monitor so she can hear her son at night. She rotates Kenny in his hospital bed every four hours so he doesn’t get bedsores.

"Especially it's hard when I wake up and can’t go back to sleep, you know, but I know he'd do the same for me. I don't worry about myself, just so long as he's took care of. That's all that matters," says Shirley.

Kenny’s wife---Pat Whitey---pays for a physical therapist to come to the house once a week. Most of her time is spent at her job reviewing loans at a financial institution, and in her off time, she and her brother-in-law handles the legal mess to get Kenny care. She spends every day before and after work at her in-laws house.

Pat and Kenny have a ten-year old son named Chance. He’s an incredibly soft spoken kid, with white hair framing his face. He helps change his father, he spends a lot of time watching TV with him, and Chance says, he’s waiting for the day his father will get better.